Orion’s management continually reminds clients that mortgage rates and prices change every day. (The Federal Reserve’s Open Market Committee, which meets this week, doesn’t set mortgage rates.) Recently mortgage rates have moved lower, but is it enough to help borrowers? Yes, rates for home loans dipped, but consumers' economic uncertainty continues to weigh down the housing market. In the weekending May 1, 30-year fixed-rate mortgages averaged 6.76%, down from 6.81% last week, according to Freddie Mac.

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It is increasingly difficult to estimate how high or low mortgage rates will go. They follow the direction of the U.S. 10-year Treasury note, since they are held for roughly the same amount of time: The average age of outstanding home loans is6.26 years, according to an analysis in April by ICE Mortgage Technology, a division of Intercontinental Exchange Inc.

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In recent weeks, the Trump administration's trade war has raised concerns that American assets are no longer as desirable for global investors as in the past. Foreigners own 30 percent of outstanding Treasuries, according to an analysis by Apollo Global Management, and a period of heavy selling in mid-April caused bond prices to drop and Treasury yields and mortgage rates to go up.

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That's entirely the opposite of what usually happens when the economy weakens, which is what most analysts are concerned about now. Orion reminds brokers that as investors buy "safe haven" assets, they push prices up and yields fall. Reduced borrowing costs, in turn, help spark growth as people take out loans to fund businesses and other purchases. But businesses and consumers are simply too anxious to do any borrowing, or buying, and instead may be riding out this period of economic uncertainty and waiting until they feel more secure to make this huge financial decision.

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To repeat, one of the primary movers of mortgage rates is the direction of the economy. When the economy slows, mortgage rates often follow suit. Declining economic growth can reduce inflationary pressures and lead to less demand for borrowing. Lenders, in turn, may lower interest rates to encourage more borrowing and investment.

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As our experienced brokers tell clients, government policy can significantly influence mortgage rates. Central banks, like the Federal Reserve in the United States, may lower certain rates like the federal funds rate (what banks charge each other to borrow overnight) to stimulate borrowing during economic slow downs. Lower interest rates can trickle down to the mortgage market, reducing the cost of borrowing.

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Inflation erodes the value of money over time, and when its high, lenders raise mortgage rates to protect their returns. However, when inflation begins to decline, it can signal lower costs for borrowing. Inflation peaked a few years ago, and now, as we enter May of 2025, inflation has come down. But with President Trump instituting tariffs, these costs will be passed on to consumers resulting in higher prices for many goods.

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Conversely, as inflation drops, interest rates typically follow, making it a good time to lock in a mortgage. Lower inflation can also increase home affordability, which is beneficial for buyers and sellers alike. Monitor inflation trends to better understand the potential direction of mortgage rates.

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There are other factors that influence a mortgage rate, such as credit scores, loan amortization, loan type (adjustable rate versus fixed rate), and down payment amount.

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Orion continues to remind our broker clients that the actual mortgage rate is only one part of the process. Rates impact every lender and borrower, but products, service, and reputation are specific to each lender. We pride ourselves on the factors that we can control, regardless of what interest rates do.

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